nep-bec New Economics Papers
on Business Economics
Issue of 2018‒05‒07
sixteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Product Line Strategy within a Vertically Differentiated Duopoly under Non-negativity Outputs Constraints By Tetsuya Shinkai; Ryoma Kitamura
  2. Resource Misallocation in European Firms: The Role of Constraints, Firm Characteristics and Managerial Decisions By Gorodnichenko, Yuriy; Revoltella, Debora; Svejnar, Jan; Weiss, Christoph
  3. Firms and Economic Performance: A View from Trade By Bonfiglioli, Alessandra; Crinò, Rosario; Gancia, Gino A
  4. Firm-to-firm Connections in Colombian Imports By Bernard, Andrew B.; Boler, Esther; Dhingra, Swati
  5. Age and High-Growth Entrepreneurship By Pierre Azoulay; Benjamin F. Jones; J. Daniel Kim; Javier Miranda
  6. Age and High-Growth Entrepreneurship By Pierre Azoulay; Benjamin Jones; J. Daniel Kim; Javier Miranda
  7. Do US Firms Pay Less Tax than their European Peers? On Firm Characteristics, Profit Shifting Opportunities, and Tax Legislation as Determinants of Tax Differentials By Michael Overesch; Sabine Schenkelberg; Georg Wamser
  8. Corporate foreign bond issuance and interfirm loans in China By Huang, Yi; Panizza, Ugo; Portes, Richard
  9. Why Do Japanese Firms Lag Behind in Introducing and Expanding IT Technologies? (Japanese) By INUI Tomohiko; KIM Young Gak
  10. Beyond Dichotomy: The Curvilinear Impact of Employee Ownership on CEO entrenchment By Xavier Hollandts; Nicolas Aubert; Abdelmehdi Abdelhamid; Victor Prieur
  11. Networks and Trade By Andrew B. Bernard; Andreas Moxnes
  12. Explaining Growth Differences across Firms: The Interplay between Innovation and Management Practices By Livio Romano
  13. A duopoly of transportation network companies and traditional radio-taxi dispatch service agencies By Thorsten Heilker; Gernot Sieg
  14. "Employment and Hours over the Business Cycle in a Model with Search Frictions" By Noritaka Kudoh; Hiroaki Miyamoto; Masaru Sasaki
  15. IO in I-O: Size, Industrial Organization, and the Input-Output NetworkMake a Firm Structurally Important By Basile Grassi
  16. Trust-based work time and the productivity effects of mobile information technologies in the workplace By Viete, Steffen; Erdsiek, Daniel

  1. By: Tetsuya Shinkai (School of Economics, Kwansei Gakuin University); Ryoma Kitamura (Faculty of Economics, Ryukoku University)
    Abstract: We consider product line strategies of duopolistic firms supplying two vertically differentiated products with non-negativity output constraint and its expectation on rival's product line reaction. We consider a game in which there exists a heterogeneous unit production costs in high quality goods but is homogeneous in low quality product between firms. We derive equilibria for the game and characterize graphically firms' product line strategies and the realized profits of both firms through quality superiority and relative cost efficiency ratios. We also show that the efficient cost firm earns more than the inefficient firm except for the special case where both firms specialize in low quality good. We also illustrate that firms can correctly conjecture the ex ante relationship between the quality superiority of both goods and the relative cost efficiency ratios of firms on high quality good ex post in equilibrium.
    Keywords: Multi-product firm; Duopoly; Substitution of Production between products; Vertical product differentiation
    Date: 2018–05
  2. By: Gorodnichenko, Yuriy; Revoltella, Debora; Svejnar, Jan; Weiss, Christoph
    Abstract: Using a new survey, we show that the dispersion of marginal products across firms in the European Union is about twice as large as that in the United States. Reducing it to the US level would increase EU GDP by more than 30 percent. Alternatively, removing barriers between industries and countries would raise EU GDP by at least 25 percent. Firm characteristics, such as demographics, quality of inputs, utilization of resources, and dynamic adjustment of inputs, are predictors of the marginal products of capital and labor. We emphasize that some firm characteristics may reflect compensating differentials rather than constraints and the effect of constraints on the dispersion of marginal products may hence be smaller than has been assumed in the literature. We also show that cross-country differences in the dispersion of marginal products are more due to differences in how the business, institutional and policy environment translates firm characteristics into outcomes than to the differences in firm characteristics per se.
    Keywords: economic growth.; firm-specific factors; Marginal products; resource allocation
    JEL: D22 D24 O12 O47 O52
    Date: 2018–03
  3. By: Bonfiglioli, Alessandra; Crinò, Rosario; Gancia, Gino A
    Abstract: We use transaction-level US import data to compare firms from virtually all countries in the world competing in a single destination market. Guided by a simple theoretical framework, we decompose countries' market shares into the contribution of the number of firm-products, their average attributes (quality and efficiency) and heterogeneity around the mean. Our results show that the number of firm-products explains half of the variation in sales, while the remaining part is equally accounted for by average attributes and their dispersion. Quality is the main driver of firm heterogeneity (explaining between 75% and 100%). We then study how the distribution of firm-level characteristics varies across countries, and we explore some of its determinants. Countries with a larger market size tend to be characterized by a more dispersed distribution of firms' sales, especially due to heterogeneity in quality. These countries also tend to be more likely to host superstar firms, although this is not the only source of higher heterogeneity. To further explore the role of exceptional firms, we develop a novel decomposition that separates the contribution of heterogeneity from that of granularity. While individual firms matter, we find that heterogeneity is more important than granularity for explaining sales.
    Keywords: Firm Heterogeneity; granularity; International Trade; prices; Quality; US Imports; Variety
    JEL: F12 F14
    Date: 2018–03
  4. By: Bernard, Andrew B.; Boler, Esther; Dhingra, Swati
    Abstract: The vast majority of world trade flows is between firms. Only recently has research in international trade started to emphasize the importance of the connections between exporters and importers both in aggregate trade flows and in the negative relationship between trade and geographic distance. This chapter documents the role of firm-to-firm connections in trade flows and the formation and duration of these importer-exporter relationships. Using customs data from Colombia for 1995-2014, we are able to identify both the Colombian importing firm and the foreign exporter in every Colombian import and export transaction. We document both the nature of these bilateral trading relationships and their evolution over time.
    Keywords: export growth; exporters; Gravity; Heterogeneous Firms; Importers; margins of trade
    JEL: F14
    Date: 2018–04
  5. By: Pierre Azoulay; Benjamin F. Jones; J. Daniel Kim; Javier Miranda
    Abstract: Many observers, and many investors, believe that young people are especially likely to produce the most successful new firms. We use administrative data at the U.S. Census Bureau to study the ages of founders of growth-oriented start-ups in the past decade. Our primary finding is that successful entrepreneurs are middle-aged, not young. The mean founder age for the 1 in 1,000 fastest growing new ventures is 45.0. The findings are broadly similar when considering high-technology sectors, entrepreneurial hubs, and successful firm exits. Prior experience in the specific industry predicts much greater rates of entrepreneurial success. These findings strongly reject common hypotheses that emphasize youth as a key trait of successful entrepreneurs.
    Date: 2018–04
  6. By: Pierre Azoulay; Benjamin Jones; J. Daniel Kim; Javier Miranda
    Abstract: Many observers, and many investors, believe that young people are especially likely to produce the most successful new firms. We use administrative data at the U.S. Census Bureau to study the ages of founders of growth-oriented start-ups in the past decade. Our primary finding is that successful entrepreneurs are middle-aged, not young. The mean founder age for the 1 in 1,000 fastest growing new ventures is 45.0. The findings are broadly similar when considering high-technology sectors, entrepreneurial hubs, and successful firm exits. Prior experience in the specific industry predicts much greater rates of entrepreneurial success. These findings strongly reject common hypotheses that emphasize youth as a key trait of successful entrepreneurs.
    JEL: J24 L26 O51
    Date: 2018–04
  7. By: Michael Overesch; Sabine Schenkelberg; Georg Wamser
    Abstract: Using pairs of similar US and European firms listed on the S&P500 or StoxxEurope600, we examine effective tax differentials between US multinational corporations (MNCs) and their European peers. We show that statutory tax rates and profit shifting opportunities are important determinants of effective tax rates. Our findings suggest substantially lower total tax payments of US MNCs after the 2017 US tax reform. Based on past reforms of Controlled Foreign Company (CFC) rules and of the principle of worldwide taxation, we confirm that international tax legislation affects effective tax expenses. We also provide evidence for heterogeneity in firm responses: MNCs with profit shifting opportunities benefit most from more-lenient CFC rules.
    Keywords: effective tax rate, tax avoidance, tax reform, CFC rule, international taxation, pair matching, difference-in-differences analysis
    JEL: H26 H32 F23
    Date: 2018
  8. By: Huang, Yi; Panizza, Ugo; Portes, Richard
    Abstract: This paper uses firm-level data to document and analyse international bond issuance by Chinese non-financial corporations and the use of the proceeds of issuance. We find that dollar issuance is positively correlated with the differential between domestic and foreign interest rates. This interest rate differential increases the likelihood of dollar bond issuance by risky firms and decreases the likelihood of dollar bond issuance of exporters and profitable firms. Moreover, and most strikingly, we find that risky firms do more inter-firm lending than non-risky firms and that this lending rose significantly after the regulatory shock of 2008-09, when the authorities sought to restrict the financial activities of risky firms. Risky firms try to boost profitability by engaging in speculative activities that mimic the behaviour of financial institutions while escaping prudential regulation that limits risk-taking by financial firms.
    Keywords: bond markets in emerging market countries; carry trade; China; shadow banking
    JEL: F32 F34 G15 G30
    Date: 2018–04
  9. By: INUI Tomohiko; KIM Young Gak
    Abstract: This study, using large panel data of Japanese firms (2006-2014), empirically analyzes the determinants of the introduction and expansion of IT technologies by Japanese firms and their effects on the firms' total factor productivity (TFP) . We examine the determinants of the extensive and intensive margins of IT investments. Significant existing research has pointed out that management participation by foreign firms leads to the introduction of the latest technology and management method, and we employ the foreign investment ratio as a proxy variable for the degree of introduction of the latest business management method using IT technologies. Our empirical results indicate that higher foreign participation leads to higher adaptation and expansion of IT technologies. We also find that IT investment in the industry positively affects IT utilization of the firm in the same industry. Our estimation results indicate positive spillover effects of management methods from the foreign firms and IT adaptation firms in the same industry, and the spillover effects play an important role in the introduction and expansion of firm IT investment. Next, we examine the effect of IT investment on TFP and TFP growth rate. Our estimation results show that IT investment has a positive and significant effect on both Japanese firms' TFP and TFP growth rates.
    Date: 2018–04
  10. By: Xavier Hollandts (CRCGM et IFGE - Kedge Business School - Kedge Business School); Nicolas Aubert (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université, INSEEC Business School - Institut des hautes études économiques et commerciales Business School (INSEEC)); Abdelmehdi Abdelhamid (CRCGM - Centre de Recherche Clermontois en Gestion et Management - Clermont Auvergne - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA - Université Clermont Auvergne); Victor Prieur (DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Employee stock ownership gives employees a voice and therefore may have a major impact on corporate governance. Thus, employee stock ownership may be a powerful mean to protect CEOs from both market for corporate control and dismissal threat. In this paper, we examine the relationship between employee stock ownership and CEO entrenchment. Following the recent French legislative changes, we use a comprehensive panel dataset of the major French listed companies over the 2009-2012 period. We document inverted U shaped relationships between employee stock ownership and CEO entrenchment. Board employee ownership representation also plays a role and increases the inflexion points of these curvilinear relationship.
    Keywords: employee stock ownership,corporate governance,CEO entrenchment
    Date: 2017
  11. By: Andrew B. Bernard; Andreas Moxnes
    Abstract: Trade occurs between firms both across borders and within countries, and the vast majority of trade transactions includes at least one large firm with many trading partners. This paper reviews the literature on firm-to-firm connections in trade. A growing body of evidence coming from domestic and international transaction data has established empirical regularities which have inspired the development of new theories emphasizing firm heterogeneity among both buyers and suppliers in production networks. Theoretical work has considered both static and dynamic matching environments in a framework of many-to-many matching. The literature on trade and production networks is at an early stage, and there are a large number of unanswered empirical and theoretical questions.
    Keywords: international trade, production networks, offshoring, productivity
    JEL: F10 F12 F14 L11 L21
    Date: 2018–04
  12. By: Livio Romano (Centro Studi Confindustria, Italy)
    Abstract: This paper provides first empirical evidence of the joint effects that innovation strategies and human resource management practices exert on firm growth. By exploiting unique information from a large sample of Italian manufacturing companies in the very recent years, it shows that investing in technology and implementing performance-based pay policies are both positively associated with a significant turnover, employment and labor productivity growth premium. However, their joint adoption does not necessarily sum the two effects. In particular, performance-based rewards boost growth of non-innovators and of firms pursuing relatively simple innovation strategies, centered around the acquisition of embodied technology. For firms strongly relying on R&D as an additional lever for product and process upgrading, the estimated effect of having in place monetary incentive mechanisms is null or even negative.
    Keywords: Heterogeneity, Innovation, Management Practices, Firm Growth
    Date: 2018–04
  13. By: Thorsten Heilker (Institute of Transport Economics, Muenster); Gernot Sieg (Institute of Transport Economics, Muenster)
    Abstract: Transportation network companies commonly enter the market for taxi ride intermediation and alter the market outcome. Compared to cooperatively organized radio-taxi dispatch service agencies, transportation network companies run larger fleets and serve more customers with lower fares, when the fixed costs of the dispatch office are relatively small. The same holds for private dispatch firms, when the fixed costs of a taxicab are not too small. These results are shown in a two-stage duopoly of fare and fleet size competition with fare- and waiting-time-dependent demand.
    Keywords: digitization, regulatory capture, taxi dispatch market, transportation network companies
    JEL: L91 R41 D43 L22
    Date: 2017–11
  14. By: Noritaka Kudoh (Department of Economics, Nagoya University); Hiroaki Miyamoto (International Monetary Fund); Masaru Sasaki (Graduate School of Economics, Osaka University)
    Abstract: This paper studies a large-firm search-matching model with variable hours of work to investigate how firms utilize the intensive and extensive margins of labor adjustment over the business cycle. Introduction of variable hours of work introduces the Frisch elasticity parameter into the analysis, and this is a key determinant of the magnitude of fluctuations in hours of work. The model replicates the observed cyclical behavior of the Japanese labor market, in which fluctuations in hours of work account for 79 percent of the variations in total labor input, well. Total labor input in the model is as volatile as that in the data, and is 25 times as volatile as that in the model without the intensive margin.
    Date: 2018–04
  15. By: Basile Grassi
    Abstract: Firm-level productivity shocks can help understand sector- and macroeconomic-level outcomes. Capturing the market power of these firms is important: it determines how productivity gains translate into prices and markups. In existing models, firms do not internalize the impact of their systemic size. This paper explores the alternative oligopolistic market structure. To this end, I build a tractablemulti-sector heterogeneous-firmgeneral equilibriummodel featuring oligopolistic competition and an input-output (I-O) network. By affecting price and markup, firm-level productivity shocks propagate both to the downstream and upstream sectors. Sector-level competition intensity affects the strength of these new propagation mechanisms. The structural importance of a firm is determined by the interaction of (i) the sector-level competition intensity, (ii) the firm’s sector position in the I-O network, and (iii) the firm size. In a calibration exercise, the aggregate volatility arising from independent firm-level shock is 34% of the one observed in the data. Keywords: Input-Output Network, Production Network, Shocks Propagation, Oligopoly, Imperfect Competition, IndustrialOrganization, FirmHeterogeneity,RandomGrowth,Granularity, Volatility, Micro-Origin of Aggregate Fluctuations, Business Cycle
    Date: 2018
  16. By: Viete, Steffen; Erdsiek, Daniel
    Abstract: We investigate whether the returns to mobile information and communication technology (ICT) in the workplace are contingent on granting employees autonomy over the structure of their workday through trust-based work time arrangements (TBW). Our regression analysis is based on a production function framework and exploits fine-grained firm survey data on ICT use and organisational practices for 1,045 service firms in Germany. We find empirical support for the argument that the returns to mobile ICT are higher when TBW allows for discretion over when, where and how to perform work-related tasks. The finding holds when we account for more limited forms of workplace flexibility, suggesting that the high degree of formal employee autonomy under TBW drives the complementarity between mobile ICT and organisational practices.
    Keywords: mobile information and communication technologies,ICT,trust-based work time,work organisation,complementarity,productivity,firm performance
    JEL: D22 L22 M10 O33
    Date: 2018

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